Silver Slumps Near $64 as Hawkish Fed Lifts Dollar

Key Moments

Fed Repricing Pressures Silver as Dollar and Yields Climb

Silver prices (XAG/USD) continue to retreat for a second consecutive session, with the metal changing hands around $64.10 per troy ounce during Asian trading on Thursday. Selling pressure on Silver remains pronounced as both the US Dollar and US Treasury yields move higher, supported by expectations of a more aggressive Federal Reserve and resilient US economic data.

Fresh Flash US S&P Global PMI figures for September have reinforced this narrative. The manufacturing gauge accelerated to 52.0, outpacing expectations and helping to counter modest softness in the services and composite readings. In the wake of these numbers, market participants sharply increased the implied probability of a 25-basis-point Fed rate increase in October to nearly 69.7%, compared with 48.7% one week earlier.

Attention in markets is now shifting toward the upcoming release of US weekly Initial Jobless Claims. At the same time, several Fed officials have reiterated backing for the most recent rate rise and have issued renewed warnings about persistent inflation risks, keeping policy expectations skewed toward further tightening and weighing on non-yielding assets such as Silver.

Hawkish Fed Signaling: Barr’s Comments Support Dollar, Pressure Risk Assets

Remarks from Federal Reserve officials are reinforcing the hawkish shift in rate expectations. Fed’s Barr adopted a notably restrictive tone, reflected in an FXS Speechtracker score of 8/10, above the historical norm of 7/10 and signaling a stronger-than-usual bias toward tighter policy.

His emphasis that “further rate hikes [are] likely needed” and that risks to achieving 2% inflation have increased, while labor market risks have receded, underscores a clear prioritization of inflation control over growth concerns. The statement that the Fed was “out of position” and needed to “recalibrate” policy conveys that the current policy stance may still be insufficiently restrictive. This backdrop typically supports the US Dollar and exerts pressure on risk-sensitive and yield-less assets, including Silver.

The FXS Fed Sentiment Index moved higher by 0.42 points to 148.81, remaining deeply in hawkish territory and well above the neutral reading of 100. In combination with the robust FXS Speechtracker score, this reinforces a market narrative of ongoing Fed tightening risk. Such a configuration is generally constructive for the Dollar against lower-yielding currencies and unfavorable for metals that do not generate income.

Geopolitics, Oil, and Inflation Expectations Add to Silver Headwinds

The interest-rate outlook is also being shaped by developments in energy markets and geopolitics. A prospective rebound in crude oil prices is emerging amid unresolved uncertainty around diplomatic discussions between the United States and Iran.

Speaking at the UN General Assembly, Iranian President Masoud Pezeshkian stated that Tehran would not submit to threats and reaffirmed the country’s intention to pursue nuclear technology for economic development. He further indicated that Iran would limit freedom of navigation through the Strait of Hormuz for as long as US sanctions and blockades remain in place.

Because elevated oil prices tend to intensify inflation pressures, these geopolitical dynamics are adding to expectations that monetary tightening could remain in place for an extended period. That policy backdrop, combined with stronger yields and a firm Dollar, continues to pose significant challenges for Silver’s price outlook.

Silver as an Asset: Structure, Drivers, and Cross-Market Linkages

Silver is a widely traded precious metal and has long served as a store of value and medium of exchange. While it is not as dominant as Gold in many investment portfolios, market participants often turn to Silver for diversification, its intrinsic value, or as a potential hedge during periods of elevated inflation. Exposure can be obtained via physical holdings such as coins and bars or through market instruments like Exchange Traded Funds that track Silver’s price in global markets.